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Articles 931 - 960 of 1026

Full-Text Articles in Portfolio and Security Analysis

Profiting From Mean-Reverting Yield Curve Trading Strategies, Choong Tze Chua, Winston T. H. Koh, Krishna Ramaswamy Aug 2005

Profiting From Mean-Reverting Yield Curve Trading Strategies, Choong Tze Chua, Winston T. H. Koh, Krishna Ramaswamy

Research Collection Lee Kong Chian School Of Business

A large class of fixed income trading strategies focuses on opportunities offered by the interest rate term structure. This paper studies a set of yield curve trading strategies that are based on the view that the yield curve mean-reverts to an unconditional curve. These mean-reverting trading strategies exploit deviations in the level, slope and curvature of the yield curve from historical norms. We consider cash-neutral trades with one-month holding periods. Some mean-reverting strategies were found to be highly profitable, and outperform, on a risk-adjusted basis before transaction costs, alternative strategies of an investment in the Lehman Brothers Bond index (by …

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Implied Measures Of Relative Fund Performance, Steve Hogan, Mitchell Craig Warachka Aug 2005

Implied Measures Of Relative Fund Performance, Steve Hogan, Mitchell Craig Warachka

Research Collection Lee Kong Chian School Of Business

We evaluate the relative performance of funds by conditioning their returns on the cross-section of portfolio characteristics across fund managers. Our implied procedure circumvents the need to specify benchmark returns or peer funds. Instead, fund-specific benchmarks for measuring selection and market timing ability are constructed. This technique is robust to herding as well as window dressing and mitigates survivorship bias. Empirically, the conditional information contained in portfolio weights defined by industry sectors, assets and geographical regions is critically important to the assessment of fund management. For each set of portfolio characteristics, we identify funds with success at either selecting securities …

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A Dynamic Model For The Forward Curve, Choong Tze Chua, Foster Dean, Krishna Ramaswamy, Robert Stine Aug 2005

A Dynamic Model For The Forward Curve, Choong Tze Chua, Foster Dean, Krishna Ramaswamy, Robert Stine

Research Collection Lee Kong Chian School Of Business

This paper develops and estimates a dynamic arbitrage-free model for the current forward curve as the sum of (i) an unconditional component, (ii) a maturity-specific component and (iii) a date-specific component. The model combines features of the Preferred Habitat model,the Expectation Hypothesis and affine yield curve models. We show how to construct alternative parametric examples of the three components from a sum of exponential functions, verify that the resulting forward curves satisfy the Heath-Jarrow-Morton conditions, and derive the risk-neutral dynamics for the purpose of pricing interest rate derivatives. We select a model from alternative affine examples that are fitted to …

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On The Intertemporal Risk-Return Relation: A Bayesian Model Comparison Perspective, Leping Wang Jul 2005

On The Intertemporal Risk-Return Relation: A Bayesian Model Comparison Perspective, Leping Wang

Research Collection Lee Kong Chian School Of Business

The existing empirical studies indicate that inferences on the intertemporal relation between expected return and volatility are highly sensitive to empirical specifications of return dynamics. Glosten, Jagannathan, and Runkle (1993) attempt to resolve this confusing situation by examining several generalizations of the standard GARCH-M model. They conclude a negative risk-return relation solely based on the models that are identified in the first step through a variety of diagnostic tests as relatively “better” models. However, it has not been shown in their study whether the evidence supporting their first-step model selection decision is significant or not. To the extent the strength …

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The Impact Of S&P Depository Receipts On The S&P Cash And Futures Market, Andrew J. Economopoulos May 2005

The Impact Of S&P Depository Receipts On The S&P Cash And Futures Market, Andrew J. Economopoulos

Business and Economics Faculty Publications

The introduction of the S&P Depository Receipt (SPDR) in 1993 was a financial innovation that produced several ripple effects in the financial markets. Not only did it allow the small investor to purchase a piece of the S&P 500 Cash Index, it would allow the large investor to utilize the security for arbitrage opportunities with the S&P 500 futures. A theoretical model of arbitrage opportunities utilizing SPDR is developed. The theoretical model provides two outcomes. First, the adoption of the SPDR as an arbitrage tool depends on transaction and liquidity costs and second, the innovation could potentially reduce the traditional …

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Is Exchange Risk Priced Beyond Intertemporal Risk?, Ines Chaieb, Stefano Mazzoto, Oumar Sy Mar 2005

Is Exchange Risk Priced Beyond Intertemporal Risk?, Ines Chaieb, Stefano Mazzoto, Oumar Sy

Faculty Articles

Recent conditional tests show that exchange risk is priced in integrated international markets. However, these results are typically obtained assuming that intertemporal risk does not matter. We test an intertemporal international asset-pricing model where the investment opportunity set is dynamic. Using a conditional orthogonalization approach, we investigate whether the exchange risk is priced once the market and intertemporal risks are fully taken into account. We find that, in addition to the market and intertemporal risks, the exchange risk is an important determinant of risk premium. We also find that the intertemporal risk, which is often overlooked in the literature, is …

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Corporate Divestitures And Spinoffs In Singapore, Francis Koh, Winston T. H. Koh, Benedict S. K. Koh Mar 2005

Corporate Divestitures And Spinoffs In Singapore, Francis Koh, Winston T. H. Koh, Benedict S. K. Koh

Research Collection Lee Kong Chian School Of Business

This paper discusses the different forms of corporate divestitures, the motives for this corporate activity, and the empirical findings about their economic outcomes. A sample of corporate divestitures is also used to identify the main motivations in the Singapore context. We conclude that divestitures are carried out to achieve operational efficiency and gain incremental profitability and liquidity. Using share price data around the event-dates, we show that announcements of divestitures generally lead to significant increases in the returns of the parent company. The positive abnormal returns are related to the relative size of the divestitures and the computed accounting gains. …

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Price Limit Performance: Evidence From Transactions Data And The Limit Order Book, Soon Huat Chan, Kenneth A. Kim, S. Ghon Rhee Mar 2005

Price Limit Performance: Evidence From Transactions Data And The Limit Order Book, Soon Huat Chan, Kenneth A. Kim, S. Ghon Rhee

Research Collection Lee Kong Chian School Of Business

In recent years, organized stock exchanges with daily price limits adopted wider limits as narrower limits were criticized for jeopardizing market efficiency. This study examines the impact of a wide price limit on price discovery processes, using data from the Kuala Lumpur Stock Exchange. Specifically, examined is the impact of daily price limits on (i) information asymmetry; (ii) arrival rates of informed traders; and (iii) order imbalance. Using both trade-to-trade transaction data and the limit order book, we compile evidence that price limits do not improve information asymmetry, delays the arrival of informed traders, and exacerbates order imbalance. These results …

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Statistical Arbitrage And Market Efficiency: Enhanced Theory, Robust Tests And Further Applications, Robert A. Jarrow, Melvyn Teo, Yiu Kuen Tse, Mitch Warachka Feb 2005

Statistical Arbitrage And Market Efficiency: Enhanced Theory, Robust Tests And Further Applications, Robert A. Jarrow, Melvyn Teo, Yiu Kuen Tse, Mitch Warachka

Research Collection Lee Kong Chian School Of Business

Statistical arbitrage enables tests of market efficiency which circumvent the joint-hypotheses dilemma. This paper makes several contributions to the statistical arbitrage framework. First, we enlarge the set of statistical arbitrage opportunities in Hogan, Jarrow, Teo, and Warachka (2004) to avoid penalizing incremental trading profits with positive deviations from their expected value. Second, we provide a statistical methodology to remedy the lack of consistency and statistical power in their Bonferroni approach. In addition, this procedure allows for autocorrelation and non-normality in trading profits. Third, we apply our tests to a wide range of trading strategies based on stock momentum, stock value, …

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Is Stellar Hedge Fund Performance For Real?, Robert Kosowski, Narayan Y. Naik, Melvyn Teo Feb 2005

Is Stellar Hedge Fund Performance For Real?, Robert Kosowski, Narayan Y. Naik, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

We apply a robust bootstrap to evaluate the performance of a large universe of hedge funds. Our bootstrap estimates indicate that the performance of the top hedge funds cannot be attributed to chance alone. This is true even after adjusting for back fill bias, serial correlation, and structural breaks. Also, we find that hedge fund alpha differences persist over three year horizons. However, an investment strategy designed around this will run into difficulties as the persistence is often confined to small funds that are effectively closed to new inflows. Moreover, Bayesian estimates suggest that standard alphas may be overestimated by …

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Is Fed Policy Still Relevant For Investors?, C. Mitchell Conover, Gerald R. Jensen, Robert R. Johnson, Jeffrey M. Mercer Jan 2005

Is Fed Policy Still Relevant For Investors?, C. Mitchell Conover, Gerald R. Jensen, Robert R. Johnson, Jeffrey M. Mercer

Finance Faculty Publications

Using 38 years of data, we show that U.S. monetary policy has had, and continues to have, a strong relationship with security returns. Specifically, we find that U.S. stock returns are consistently higher and less volatile during periods when the Federal Reserve is following an expansive monetary policy. Further, firms considered to be more sensitive to changes in monetary conditions, such as small firms and cyclicals, exhibit monetary-policy-related return patterns that are much more pronounced than average. Lastly, the influence of U.S. monetary policy is shown to be a global phenomenon, as international indices have return patterns similar to those …

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Penny Pricing And The Components Of Spread And Depth Changes, David K. Ding, K.H. Chuang, C. Chearoenwong Dec 2004

Penny Pricing And The Components Of Spread And Depth Changes, David K. Ding, K.H. Chuang, C. Chearoenwong

Research Collection Lee Kong Chian School Of Business

Recent studies show that decimal pricing led to significant reductions in the spread and depth on the NYSE. In this paper, we examine how the observed changes in the spread and depth can be attributed to different factors. We show that stocks with higher proportions of one-tick spreads and odd-sixteenth quotes, and more frequent trading before decimalization experienced larger declines in the spread and depth afterwards. We interpret this result as evidence of reduced binding constraints and increased price competition under decimal pricing. We also find that decimal pricing led to nontrivial changes in select stock attributes, and that these …

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Investing When Volatility Fluctuates, Leping Wang Dec 2004

Investing When Volatility Fluctuates, Leping Wang

Research Collection Lee Kong Chian School Of Business

No abstract provided.

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International Joint Ventures And Political Risk, Sundaram Janakiramanan, Lamba Asjeet S. Nov 2004

International Joint Ventures And Political Risk, Sundaram Janakiramanan, Lamba Asjeet S.

Research Collection Lee Kong Chian School Of Business

In recent years, a number of researchers have examined the existence and source of shareholder wealth effects around announcements of international joint ventures. The results of these studies are mixed with no clear answers as to when and why investors attach value to firms using joint ventures to enter overseas markets. In this context, we examine the shareholder wealth effects for 92 international joint venture announcements made by Australian firms during June 1988 - December 1997. We find that, on average, shareholders of firms announcing joint ventures realize an abnormal return of +1.65% over the two-day announcement period of days …

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Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo Nov 2004

Style Effects In The Cross-Section Of Stock Returns, Melvyn Teo, Sung-Jun Woo

Research Collection Lee Kong Chian School Of Business

Using CRSP stock and mutual fund data, we find strong evidence for reversals at the style level (e.g., large value, small growth, etc.). There are significant excess and risk-adjusted returns for stocks in styles characterized by the worst past returns and net inflows. We also find evidence for momentum and positive feedback trading at the style level. These value and momentum effects are driven neither by fundamental risk nor by stock-level reversals and momentum. Taken together, the results are consistent with the style-level positive feedback trading model of Barberis and Shleifer (2003).

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The Impact Of Regulation Fair Disclosure On Information Asymmetry And Trading: An Intraday Analysis, Chiraphol N. Chiyachantana, Christine X. Jiang, Nareerat Taechapiroontong, Robert A. Wood Nov 2004

The Impact Of Regulation Fair Disclosure On Information Asymmetry And Trading: An Intraday Analysis, Chiraphol N. Chiyachantana, Christine X. Jiang, Nareerat Taechapiroontong, Robert A. Wood

Research Collection Lee Kong Chian School Of Business

This study examines the impact of Regulation Fair Disclosure (FD) on liquidity, information asymmetry, and institutional and retail investors trading behavior. Our main findings suggest three conclusions. First, Regulation FD has been effective in improving liquidity and in decreasing the level of information asymmetry. Second, retail trading activity increases dramatically after earnings announcements but there is a significant decline in institutional trading surrounding earnings announcements, particularly in the pre‐announcement period. Last, the decline in information asymmetry around earnings announcements is closely associated with a lower participation rate in the pre‐announcement period and more active trading of retail investors after earnings …

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The Contribution Of A Satellite Market To Price Discovery: Evidence From The Singapore Exchange, Vicentiu Covrig, David K. Ding, Buen Sin Low Oct 2004

The Contribution Of A Satellite Market To Price Discovery: Evidence From The Singapore Exchange, Vicentiu Covrig, David K. Ding, Buen Sin Low

Research Collection Lee Kong Chian School Of Business

The Singapore Exchange (SGX), a small satellite market, successfully competes with a large home market, the Osaka Securities Exchange (OSE), in trading the Nikkei 225 futures index. In this paper, we investigate the contribution of the SGX to price discovery and shed light on the reasons for its continued success. Evidence is provided from information revelation and price discovery of three competing but informationally linked markets of the Nikkei 225 index - domestic spot (Tokyo Stock Exchange), domestic futures (OSE), and foreign futures (SGX), which represents the satellite market. Overall, the futures market contributes 77% to price discovery, with the …

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Testing Market Efficiency Using Statistical Arbitrage With Applications To Momentum And Value Strategies, Steve Hogan, Robert Jarrow, Melvyn Teo, Mitchell Warachka Sep 2004

Testing Market Efficiency Using Statistical Arbitrage With Applications To Momentum And Value Strategies, Steve Hogan, Robert Jarrow, Melvyn Teo, Mitchell Warachka

Research Collection Lee Kong Chian School Of Business

This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage circumvents the joint hypothesis dilemma of traditional market efficiency tests because its definition is independent of any equilibrium model and its existence is incompatible with market efficiency. We provide a methodology to test for statistical arbitrage and then empirically investigate whether momentum and value trading strategies constitute statistical arbitrage opportunities. Despite adjusting for transaction costs, the influence of small stocks, margin requirements, liquidity buffers for the marking-to-market of short-sales, and higher borrowing rates, …

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Risk, Return And Risk Aversion: A Behavioral Rendition, Hian Ann, Christopher Ting Sep 2004

Risk, Return And Risk Aversion: A Behavioral Rendition, Hian Ann, Christopher Ting

Research Collection Lee Kong Chian School Of Business

Behavioral finance and classical finance based on utility maximization appear to be mutually exclusive schools of thought. Despite the fundamental difference, we show that behavioral finance also has a linear relation between risk and return. This relation is obtained without the assumptions of market equilibrium, rational expectations, a specific utility function and the market portfolio. In the behavioral approach, the pricing error of CAPM is not an error. It is attributable to the higher-order moments of return. Empirical tests suggest that the relative risk aversion coefficient is positive and time-varying. Moreover, it correlates negatively with both volatility and return.

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Information Contents Of Trade And Quote Imbalances, And The Hypothesis Of Reverse Liquidity, Hian Ann, Christopher Ting Sep 2004

Information Contents Of Trade And Quote Imbalances, And The Hypothesis Of Reverse Liquidity, Hian Ann, Christopher Ting

Research Collection Lee Kong Chian School Of Business

In this paper, we study the information contents of imbalances in trades and quotes emanated from an exchange resembling the one envisioned by Black (1971). We find dollar volume is more informative than number in measuring daily trading and quoting activities. Our measure of quote imbalance permits an investigation on the information asymmetry between market and limit orders. In case illegal insider trading does not occur regularly, we present a hypothesis of reverse liquidity as an alternative interpretation for our empirical findings. It could be that market-order traders charge an implicit liquidity premium for fulfilling the contrarian trading demand of …

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How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo Aug 2004

How Do Institutional Investors Trade, Paul G. J. O'Connell, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

Using a novel and detailed custody trades dataset, this paper analyzes the trading behavior of institutions. Extant studies have examined the effects of past performance on trading by retail investors, day traders, and futures floor traders. Yet very little work has been done on institutions. We find that unlike other investors, institutions take on more risk following an increase in net profit and loss. However, the responses to a gain and loss are highly asymmetric. Institutions aggressively reduce risk in the wake of losses, but only mildly increase risk in the wake of gains. This asymmetry is more pronounced for …

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Obesity, Educational Attainment, And State Economic Welfare, Martin W. Sivula Ph.D. May 2004

Obesity, Educational Attainment, And State Economic Welfare, Martin W. Sivula Ph.D.

MBA Faculty Conference Papers & Journal Articles

For the first time in history, estimates of the overweight people in the world rival estimates of those malnourished. The World Health Organization (WHO, 2002) ranked obesity among the top 10 risks to human health worldwide. In the early 1960s, nearly half of the Americans were overweight and 13% were obese. Today some 64% of U.S. adults are overweight and 30.5% are obese. Even more alarming, twice as many U.S. children are overweight than were twenty years ago, a 66% increase. Non-communicable diseases impose a heavy economic burden on already strained health systems. Health is a key determinant of development …

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International Cross-Listing And The Bonding Hypothesis, Dan Segal, Michael King May 2004

International Cross-Listing And The Bonding Hypothesis, Dan Segal, Michael King

Research Collection School Of Accountancy

The authors describe a new view of cross-listing that links the impact on firm valuation to the firm's ability to develop an active secondary market for its shares in the U.S. markets. Contrary to previous research, cross-listing may not provide benefits for all firms, even when those firms meet the highest regulatory requirements for disclosure and supervision. When cross-listed firms are divided into two groups on the basis of their share turnover in the home market relative to the U.S. market, the firms that develop active trading in the U.S. market experience an increase in valuation. Cross-listed firms that remain …

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The New Economy And Its Implications To Investors, Elizabeth Misco Apr 2004

The New Economy And Its Implications To Investors, Elizabeth Misco

Honors Capstones

Capstone submitted as a graduation requirement for the BSU Honors Program.

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Equity Style Returns And Institutional Investor Flows, Kenneth A. Froot, Melvyn Teo Mar 2004

Equity Style Returns And Institutional Investor Flows, Kenneth A. Froot, Melvyn Teo

Research Collection Lee Kong Chian School Of Business

This paper explores institutional investor trades in stocks grouped by style and the relationship of these trades with equity market returns. It aggregates transactions drawn from a large universe of approximately $6 trillion of institutional funds. To analyze style behavior, we assign equities to deciles in each of five style dimensions: size, value/growth, cyclical/defensive, sector, and country. We find, first, strong evidence that investors organize and trade stocks across style-driven lines. This appears true for groupings both strongly and weakly related to fundamentals (e.g., industry orcountry groupings versus size or value/growth deciles). Second, the positive linkage between flows and returns …

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The Effects Of Asset Allocation And Active Management On Total Return Of Managed Funds, Florian Halili Jan 2004

The Effects Of Asset Allocation And Active Management On Total Return Of Managed Funds, Florian Halili

Business and Economics Honors Papers

Portfolio managers are charged with maximizing returns for a given level of risk. There are practical problems that arise in creating an efficient portfolio and maintaining a target level of risk and return. This paper will identify two important factors that a manager needs to address in creating and managing a portfolio. The first step in creating a portfolio should be the establishment of the structure of the portfolio or the portfolio policy, what asset classes it holds and in what proportions. The structure of the portfolio is the main factor that shows how a portfolio is exposed to risk. …

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Shareholder Proxy Access To The Ballot: What Will Be The Implications Of The Sec's Proposed Shareholder Access Rule If It Is Adopted From Governance, Implementation And A Public Perspective?, Bryan J. Shea Jan 2004

Shareholder Proxy Access To The Ballot: What Will Be The Implications Of The Sec's Proposed Shareholder Access Rule If It Is Adopted From Governance, Implementation And A Public Perspective?, Bryan J. Shea

Seton Hall University Dissertations and Theses (ETDs)

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Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler Jan 2004

Privatizing Telecoms And Residual State Influence On Financial Performance, Burkhard N. Schrage, Paul M. Vaaler

Research Collection Lee Kong Chian School Of Business

We test competing theoretical perspectives explaining likely shareholder returns from material investment decisions announced by privatizing telecommunications firms (telecoms) with varying levels of residual state ownership. A principal-agent perspective suggests that decrease in residual state ownership in privatizing telecoms leads to more positive shareholder returns. Over time, this effect increases. An alternative credible privatization perspective suggests that retention of substantial (though not controlling) residual state ownership leads to more positive shareholder returns, but only in the short run. Over time this ownership effect fades quickly. We examine empirical support for these competing perspectives with an event study analyzing cumulative abnormal …

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Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell Nov 2003

Prospect Theory And Institutional Investors, Melvyn Teo, Paul G. J. O'Connell

Research Collection Lee Kong Chian School Of Business

There is ample evidence that past performance affects the trading decisions of individual investors. This paper looks at this issue using a detailed database of currency trading decisions of institutional investors. Past performance manifestly affects currency risk-taking in this group, but the sign and magnitude of the effect runs counter to much of the existing theory and evidence. There is no evidence whatsoever of disposition effects; rather, the dominant characteristic is aggressive risk reduction in the wake of losses. This effect is more prominent later in the year, and among older and more experienced funds. A modified version of the …

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Incorporating Diversification Into Risk Management, Mitchell Craig Warachka, A. Purnanandam, Y. Zhao, W.T. Ziemba Oct 2003

Incorporating Diversification Into Risk Management, Mitchell Craig Warachka, A. Purnanandam, Y. Zhao, W.T. Ziemba

Research Collection Lee Kong Chian School Of Business

No abstract provided.

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